OTTAWA–Canadian companies are being shut out of prized contracts in the United States while Ottawa and the provinces dicker over a proposed trade-rules compromise that U.S. President Barack Obama could use to try to weaken Buy America policies.
Prime Minister Stephen Harper and Obama discussed the explosive protectionism issue on the sidelines of the G8 summit in Italy last week. It's clear the U.S. administration is waiting for Ottawa's proposal before moving forward with its bid to slow the Buy America juggernaut being propelled by state and local governments.
"The ball is definitely in our court," Trade Minister Stockwell Day said in an interview.
Ottawa is waiting for the premiers to approve a declaration temporarily committing provinces and municipalities not to discriminate against U.S. companies bidding for contracts at the provincial and local level in Canada. This would then be forwarded to U.S. officials as an offer of compromise on trading rules.
The premiers have shown support for the idea, but it raises tricky issues for the provinces about which contracts will be open to all bidders, how the process will work and how it will affect Canadian firms.
The provinces are examining the declaration, Day said.
"We're getting some pretty favourable first responses from provinces. Some are getting back to us right now with some questions on some details."
But he said time is of the essence: "I'm saying, `Okay, we understand that they (the premiers) need to take some time to look at this,' but the longer they wait, the more at risk some of their own businesses and workers will be in terms of bidding into the U.S."
The offer is part of an extensive effort by the Harper government to work with the White House to halt the U.S. protectionist wave that is hurting Canadian manufacturers, who can't bid on contracts funded by Obama's $787 billion (U.S.) stimulus package.
Day sees the offer as the key to winning an exemption from Buy America provisions for Canadian companies – and possibly preventing a tit-for-tat trade war that could batter Canada's economy.
Ottawa hopes to have an agreement with the provinces to present to the U.S. administration in about three weeks.
An aide to Quebec Premier Jean Charest, chair of the premiers' council, said it's impossible to say how long the negotiations will take.
A spokesperson for Premier Dalton McGuinty said "everyone continues to work together and Ontario is committed to moving this forward. As there are wide implications, we want to ensure we get it right."
Protectionist sentiment is running wild south of the border, and corporate Canada, the U.S. Chamber of Commerce and the entire Canadian diplomatic corps in the United States have joined forces in an intensive campaign to avoid an economic calamity.
It's a reaction to the massive U.S. economic recovery legislation, which contains provisions outlawing the use of foreign-made steel, iron or other manufactured goods in infrastructure projects paid for out of the $787 billion.
Obama tried to head off a trade war by saying all these contracts had to be done in keeping with NAFTA obligations banning discrimination against foreigners. But U.S. cities and state governments, which are administering about a third of the spending, say NAFTA rules don't apply to them.
As a result, manufacturers – many in Ontario – have found themselves shut out of markets in the U.S. where they have done business for years. The Ottawa-based Canadian Manufacturers & Exporters has identified more than 200 Canadian firms that have been adversely affected.
Only a small portion of the $787 billion package has been spent, meaning the full impact for Canadian firms hasn't been felt.
At the recent G8 summit, Harper took a moment to warn Obama of the damage being done by the protectionist movement, Day said.
Day's compromise proposal hinges on the fact that, unlike the Canadian government, provinces and cities in Canada are not formally committed to fair trade practices with U.S. bidders because premiers did not sign on to procurement rules under the 1994 NAFTA deal.
Day says the U.S. Congress is using that as an excuse to allow their state and local governments to discriminate against Canadian exporters.
By equalling the playing field, the federal-provincial declaration now under consideration would undercut the arguments against fair play for Canada, he said.
A senior official in U.S. Trade Representative Ron Kirk's department said the Americans would welcome an overture from Ottawa. However, "we can't prejudge the outcome" of the compromise offer, the official warned.
Looming in the background is a threat of protectionist retaliation by Canadian mayors. More than a dozen communities have passed resolutions saying they will only hand out contracts to bidders from countries that don't discriminate against Canadian firms.
now with SAUCE
ew, when will this be over?
thoughts? questions? concerns?